Tesla (TSLA) Stock Spike After Q3 Earnings Report

Tesla’s long-awaited Q3 earnings report exceeded all expectations on Wall Street on Wednesday. The electric carmaker reported a net income of $1.91 per TSLA share while analysts expected a loss of 46 cents per share.

In after-hours trading, Tesla stock price rose quickly. TSLA closed on at $254 but jumped more than 20 percent to $306 in late trading after the earnings report.

Tesla hasn’t really spoiled its investors. This is just the fifth quarterly profit for the company in more than ten years.
From the company they said they expect “positive quarterly free cash flow going forward, with possible temporary exceptions,” saying:

“We continue to believe our business has grown to the point of being self-funding.”

Last month, Tesla reported record third-quarter deliveries, but investors wanted to wait and see how much profit Tesla could get from its increasing volume of sales. Revenues of $6.3 billion were as previously forecasted. Gross margins went even higher by rising 18.9 percent vs. 17.7 percent previously predicted.

That’s important because Tesla recently made massive capital investments in Shanghai, China “Gigafactory.” They said:

“We are already producing full vehicles on a trial basis, from body, to paint and to general assembly, at Gigafactory Shanghai. We have cleared initial milestones toward our manufacturing license and are working towards finalizing the license and meeting other governmental requirements before we begin ramping production and delivery of vehicles from Shanghai.”

The company added, “Gigafactory Shanghai was built in 10 months and is ready for production, while it was ~65% less expensive (capex per unit of capacity) to build than our Model 3 production system in the US.” They said:

“Despite reductions in the average selling price (ASP) of Model 3 as global mix stabilizes, our gross margins have strengthened.”

During his call with the investors, Tesla’s CEO Elon musk confirmed Tesla is producing the Model S and Model X for “sentimental reasons more than anything else.” He added that those two vehicles present only “really of minor importance to future.” Sentimental or not, the truth is that while the Model S and X have been slightly expensive and had less volume than the Model 3, all of the vehicles have been crucial to the financial state of the company for many years. Moreover, it is said that the company may roll out controlled access to its full self-driving option even this year already.

Company’s CFO Zach Kirkhorn noted during the call that Tesla plans to raise its production on Model S and X lines for this quarter responding to increasing demand for electric vehicles. He said that, as the company presented and perfected its Model 3, it can now put its attention on the rest of its other products. Kirkhorn added that the company will continue to see higher-order rates, which would probably be seen in Model S and X deliveries in the fourth quarter.

Tesla announced it’s ahead of schedule on Model Y production that is expected to be launched next year. The company also reported that last month’s U.S. launch of Smart Summon that lets some Tesla drivers use an application to remotely call and control their vehicle saw the feature used 1 million times. The cars can pick its owners up from a short distance away.

This is also the first earnings report since the co-founder and former CTO JB Straubel left the company, and since the company finished the acquisition of two companies – computer vision startup DeepScale, and a battery manufacturing firm called Hibar Systems.

At the time of writing, Tesla (TSLA) stock was slightly falling in premarket, by 0.35% to $254.68.

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